Millennials get a lot of flack these days. But the reality is that they are the fastest growing group in the workforce, and they want their money to reflect their values. They also are dealing with some specific challenges arising from graduating college during a recession and dealing with high debt loads compared to previous generations.
Millennial women? Despite the progress we've made in the women's movement, millennial women still contend with a wage gap. Women are more likely to be the ones to take time away from work to care for children, and we know that wage gap grows significantly after having children. And of course, women live longer than men! It is more important than ever to apply good financial principles as soon and as consistently as possible.
Fortunately, YOU are in the driver's seat. There are many things you can do take control of your finances so you can achieve your life goals. Have you ever experienced harassment or worse at work? How many of us can say #metoo? Yeah, me too. Women having money set aside gives us the power to walk away from a bad situation at work when you need to, rather than feeling stuck in a situation just because of money. Ditto for our relationships.
Some of the best advice I have for millennial women includes the following:
1. Spend mindfully (and track your spending). We pay attention to what we measure. Before you buy something, consider whether it’s something you actually value, how you would feel about having spent that money a year from now or 30 years from now. What additional richness could you bring to your life in the future by forgoing this purchase? Just bringing awareness to how you spend your money will help you make better choices.
We all have more discretionary income than we realize. And sometimes you can spend a little money upfront in order to save money long term. For example, if you really love having your fancy coffee every morning, then buy a espresso maker to have at home (or ask for it as a Christmas or birthday gift!) and skip the $5 trip every day.
The key is to look at how you are spending money, and see if it really brings you closer to your goals. Track your spending for 30 days (or if you buy everything on a card you will be able to look at your transactions). Now ask yourself the following questions:
How did this expense make my life better?
Did spending this money get me closer to my life goals?
Does this money spent align with my values?
Is there a way I could have gotten the same benefit in my life for less money?
What patterns in my life are costing my money?
2. Build an emergency fund. Cash on hand gives you freedom and the control to choose your own path, to walk away from a bad job situation, a relationship that’s no longer working for you, or just move toward the life you want to live. If you’re in debt, start with just $1,000. If you don't have some money in the bank, then you will always keep going back into debt whenever life hits you. You want to set up an automatic withdrawal from your paycheck so that you won't ever see that money, and it can start to accrue.
Another great way to build you emergency fund and savings is to make a plan for any unexpected money you get. Birthday gifts, interest payments, bonuses, etc. It is totally okay to give yourself permission to have a little fun. But make yourself a deal that you will put a certain percentage of any extra money into your savings account.
3. Evaluate your debt situation. Many of you likely have student loans and possibly credit card or other debt. Write down all debts in order from highest to lowest interest rates. High interest debt like credit card debt should be avoided and paid off as aggressively as possible, even if it means making sacrifices to your lifestyle. If you have high interest debt, then paying that down as soon as possible will really help your overall financial picture.
Women tend to have more student loans than men, for many reasons. If this is you, remember that you probably still want to pay off any higher interest debt first, and then you can tackle your student loans with full attention. Check out my financial hierarchy of needs for more info on prioritizing debts.
4. Save early and often for retirement. Time is on your side! If you start saving for retirement in your twenties, you can successfully fund your retirement with much less than if you wait.
Let me give you an example. I have a friend who has maxed out on her retirement as soon as she could in her twenties. Even when she wasn't making that much money, she made sure to put that money aside. Because of that and her savings, she is now 47, and was able to take a much needed sabbatical from work. She now has a lot of flexibility because she started to save really young.
There is really no way to replicate the value of money over time! If your employer offers a retirement plan, be sure to contribute at least enough to get the full employer match -- don’t leave free money on the table. Even better, challenge yourself to put in 10% or more of your pre-tax income into retirement or fully fund a Roth IRA each year.
5. Align your money with your values. Millennials are most likely to want to put their money where their mouth is. This is something you can do in terms of how you spend your money, but also with your investments. Many of my clients are feminists, and I encourage them to consider gender lens investing, which targets companies that specifically source female leadership. Women in leadership beget more women in leadership, which is good for companies and good for women and girls around the world.
With your day-to-day spending, consider what you care about and why? Why spend money on things that aren't meaningful to your life? Of course, you can't get out of paying the electricity bill, but don't get stuck doing things just because it's what other people do. And find friends and other women to connect to who share those values! It will make it easier to accomplish your goals when the people you spend the most time with are on the same page, and have similar money goals as you do.
So there you have it. Money = Choices = Power. Do you need help evaluating your current financial picture and making a plan? Contact me and let's chat!